FDI net inflows up 20% in August

FOREIGN DIRECT INVESTMENTS (FDI) jumped by 20% in August, even as tighter lockdown restrictions were imposed during the month. — REUTERS

FOREIGN DIRECT investments (FDI) jumped by 20% in August, although investors remained cautious as seen in the lower reinvestment of earnings and higher equity capital withdrawals.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed net inflows of FDI rose by 19.8% year on year to $812 million from $677 million in the same month in 2020.

However, FDI dropped by 35% from the $1.263 billion inflow seen in July.

The annual growth in August reflects investor sentiment on the government’s handling of the pandemic, Asian Institute of Management economist John Paulo R. Rivera said.

“FDI increased because of recent developments which are more definite and clear than before. Vaccination rate has also been significantly increasing which increased investor confidence on our economy,” Mr. Rivera said in a Viber message.

Metro Manila and some high-risk areas were placed under the strictest lockdown for two weeks in August to curb the Delta-driven surge in coronavirus infections.

By segment, foreign investments in debt instruments rose by 38% to $636 million in August from $461 million a year ago.

Investments in equity and investment fund shares dropped by 18.8% to $176 million in August, while reinvestment of earnings fell by 24.7% to $99 million.

FDIs in equity capital likewise fell by 9.7% year on year to $77 million in August from $85 million. This as placements went up by 7.3% to $126 million, while withdrawals significantly rose by 51.2% to $50 million.

Placements in August mainly came from Japan, the Netherlands, and the United States. These were invested into manufacturing, information and communication, and real estate industries.

While overall FDIs rose in August, the details show cautious sentiment remains among foreign investors, UnionBank of the Philippines, Inc. Chief Economist Carlo O. Asuncion said.

“Contraction of reinvestment of earnings is also [a] relevant [detail] considering this signifies confidence (or non-confidence) by investors in a certain country or economy,” he said in a Viber message.

For the first eight months, FDI net inflows increased by 39.7% to $6.373 billion from $4.562 billion a year earlier.

“The cumulative FDI net inflows rose on the back of the 71.6% growth in non-residents’ net investments in debt instruments to $4.5 billion from $2.6 billion. Likewise, reinvestment of earnings rose by 11% to $776 million from the $699 million registered last year,” the BSP said.

Non-residents’ net investments in equity capital slumped by 12.2% to $1.1 billion in the eight-month period.

Mr. Asuncion said he welcomes the bigger FDI flows year to date and in August, but added the details relating to the inflows show the country has not reached its “pre-pandemic level and attractiveness to investors yet.”

“This, we know, because August was a month of the renewed restrictions due to the COVID-19 infections surge, and overall, there is still lingering uncertainty on the pace of economic recovery,” he said.

The better-than-expected third-quarter economic growth could help boost the country’s attractiveness to foreign investors, Mr. Asuncion said.

In the July to September period, the economy grew by 7.1% year on year and by 3.8% quarter on quarter, the Philippine Statistics Authority reported on Tuesday.

The BSP in September said it projects FDI net inflows to reach $7 billion this year. — L.W.T.Noble